CDA Institute Blog: The Forum

  • Home
    Home This is where you can find all the blog posts throughout the site.
  • Categories
    Categories Displays a list of categories from this blog.
  • Tags
    Tags Displays a list of tags that have been used in the blog.
  • Bloggers
    Bloggers Search for your favorite blogger from this site.
  • Team Blogs
    Team Blogs Find your favorite team blogs here.
  • Login
    Login Login form

Part 2 — The Russo-​American Big Energy Orgy: Bringing Big Energy Back

  • Font size: Larger Smaller
  • Print

CDA Institute Security & Defence Blogger David Law, a Senior Associate/​Fellow at the Security Governance Group/​Centre for Security Governance in Kitchener, discusses what the global energy sector might look like in the near future. He analyzes various oil-​rich regions, suggesting that a bounce-​back in the Russian and American energy economy is, perhaps, dependent on conflict in the Middle East. This is Part 2 of a two-​part series.

In the first part of this post, I argued that one of the more important back stories of the 2016 US elections was a Russian-​American effort to restore the sagging fortunes of their traditional energy businesses. This second part explains how this may actually happen.

Rex Tillerson, Trump’s nominee for US Secretary of State, and Rosneft Chief Igor Sechin, cannot turn back the clocks of history. They can, however, work to reverse what have been for them the negative trends of recent years. To do so, a number of things have had to happen.

The first thing is already in place. Trump won the elections against Hillary Clinton, who during her campaign was strongly in favour of continuing the sanctions against Russia for its machinations in Ukraine and maintaining US government support for the rising non-​carbon energy industries. Trump seems determined to do exactly the opposite.

Second, the Trump victory has set the stage for the dismantling of the regulations that are supposed to prevent, say, New York from becoming as environmentally scary as New Delhi

or Beijing. In November 2016, pollution levels in the Indian capital were fifteen times the level generally presumed to be non-​noxious for humans, threatening to cause in the process cancers and respiratory diseases.

Note that Trump’s nominee to head up the Environmental Protection Agency is an individual known for his commitment to dismantle it. As part of this process, we should expect Trump to withdraw the US from the Paris Climate Change Agreement as well or at least freeze American participation.

Third, if you want to make energy prices high again for Exxon Mobile and Rosneft, you also need more chaos in the Middle East. At the latest with the ongoing massacres of Sunni populations in Syrian Aleppo, Saudi Arabia now seems poised to try to take Shiite Iran down a peg. The Saudis have witnessed the growing strength of their Iranian rivals in a geopolitical space that stretches from Lebanon to Iraq through Syria. At the same time, pro-​Iranian forces have the upper hand in Yemen’s civil war. The Saudis are concerned about a new wave of unrest among their own Shiite minority and Shiite communities in neighbouring Gulf states. A bilateral confrontation beckons in which other Sunni and Shiite states seem likely to join in.

The Saudis have been spending some 13% of their budget on the armed forces, one of the highest rates in the world, at the same time as their overall revenues have been in decline because of the downward spike in oil prices. They probably hope that a war with Iran will allow them to reverse its return to the oil market and in turn produce a rise in oil prices.

The most likely outcome from a Saudi-​Iranian conflict will, however, likely be a messy draw, reminiscent of the Iraqi-​Iranian conflict of the 1980s, that will result in both being less capable of exporting their oil. This will, in turn, mean a rise in the price of American and Russian energy exports – and the stocks of anyone invested in them.

I have found no evidence that President-​elect Trump has any investments in either American or Russian energy stocks. But I would not bet the barn on this not being the case. In this connection, it may be useful to recall Trump’s comments on the campaign trail when he proposed that to get ISIS, one had to get its oil by bombing the hell out of them – and then the US and Exxon Mobile would go in and take over their oilfields.

What might be a triumph for Tillerson and Sechin, and their respective patrons, is clearly not in the interest of their country’s populations. In the United States, the new re-​utilizable energy sources are rapidly becoming cheaper than their carbon equivalents. They are generating more jobs. They have the potential to continue building International cooperation, following the lead of the Paris Climate Change Agreement.

For Russia, higher prices for their oil and gas would reduce the prospects for the long overdue fundamental changes that are needed in the country’s system of governance if it is to thrive in the twenty-​first century.

Moreover, a continuation of the sectarian violence in the Middle East will sooner or later also threaten Russia. The country has a Muslim population of some fifteen million, of which roughly twenty percent live in Moscow. They are overwhelmingly Sunni. It may just be that Putin is calculating that a Sunni uprising in Russia will help him play the anti-​terrorist card and enhance his efforts to construct a deepening dictatorship. But if so, this is the kind of gamble of which catastrophes are made.

The repercussions of a Trump/​Tillerson/​Putin/​Sechin plot to jack up the prices of traditional energy sources are likely to be felt further afield.

So, for example, an increase in oil prices could dampen the already very dim prospects for democratic change in Venezuela, keeping its increasingly fragile dictatorship in place. And this in turn could weaken the pressures for change in Cuba whence I post this piece.

Cuba was saved from economic collapse in the late nineties when Caracas started providing it with cheap oil. This gave Havana the wherewithal to power its weakening economy and to sell to third parties the remaining fifty percent or so to earn the foreign currency it so seriously lacked. In return, Havana supplied Caracas with doctors and teachers, and security personnel whose mission it was to protect the Chavista régime just as it had defended its Fidelista patrons in Cuba.

But maybe none of this will come to pass. Maybe, the US Senate will reject Tillerson and tame Trump. Maybe, the anti-​regulation wave will be stopped in its tracks. Maybe, cooler heads will prevail in Riad and Teheran.

And maybe pigs can fly.

David Law, a former Head of the NATO Policy Planning Unit, is a Senior Fellow with the Centre for Security Governance.

(Photo by Flickr user “Neil Armstrong2”)

in Analysis Hits: 228 0 Comments
0

Comments

  • No comments made yet. Be the first to submit a comment

Leave your comment

Guest Tuesday, 21 February 2017
Home | Blog: The Forum | Part 2 — The Russo-​American Big Energy Orgy: Bringing Big Energy Back

Support Us

The CDA Institute is seeking donors and corporate sponsors for Fiscal Year 2016/​2017 to support its research activities, events and publications, which are disseminated amongst various audiences. Read More

CDA Institute

Created in 1987, the CDA Institute is a charitable and non-​partisan research organization whose mandate is to promote informed public debate on national security and defence issues and the vital role played by the Canadian Armed Forces in our society.

Contact Us

Conference of Defence Associations/​
CDA Institute
151 Slater Street, Suite 412A
Ottawa, Ontario K1P 5H3
Canada

Telephone: +1 (613) 2369903